CDC's financial problems may improve

The Crompton & Knowles factory at 93 Grand St. Main South CDC is selling this building to a nonprofit Boston developer.

WORCESTER — The city's largest nonprofit developer of low-income housing is facing serious financial problems, as well as internal turmoil from a bitter falling out between two of its longest-serving officials.

The Main South Community Development Corp. has been delinquent on property taxes, forced to sell valuable assets, tap developer fees — its "rainy day fund" — to cover operating expenses such as payroll, and lay off employees, according to CDC documents and interviews with group officials.

Meanwhile, the nasty feud between the CDC's executive director, Stephen Teasdale, and William T. Breault, the sometimes controversial leader of the Main South Alliance for Public Safety and a longtime CDC board member and former board president, has roiled the group.

These issues are playing out as the CDC prepares to divest one of the city's most iconic industrial era buildings, a move that the group's leaders say was needed to ensure the CDC's financial viability.

If the transaction goes through as expected, the CDC will sell the historic Crompton & Knowles building to The Community Builders, a Boston-based developer of low-income housing.

The price is not set yet, but it will likely be enough to nearly offset the more than $2 million the CDC has borrowed and spent on the building since 2006, just before the real estate crash, CDC officials say.

The Community Builders plans to convert the 108-year-old former loom works at 93 Grand St., now boarded up and marred by graffiti, into 94 units of mostly low-income rental housing.

On the surface, the sale of its biggest asset ever also rids the CDC of a big liability; it costs some $100,000 a year just to insure and maintain the building, and pay the mortgage, taxes and utilities on the sprawling brick edifice.

CDC officials see the sale as providing a measure of financial relief during a period in which the group has been buffeted not only by a tough economy, but also by a shut-off of city-controlled federal grant funding as the U.S. Department of Housing and Urban Development audits the grant program.

"Clearly there are concerns due to the issues we've been facing over the last two years with losing a major source of funding," said Stephen Teasdale, the group's veteran executive director. "We're not on the verge of going out of business. The issue we have is cash flow."

HUD, city officials say, wants to be repaid hundreds of thousands of dollars in HUD block grant funds that the city's five CDCs spent on items deemed ineligible for public funding, such as basic operating costs and employee salaries. Mr. Teasdale, and other CDC leaders, have fought back, saying it was the city's lack of monitoring, not them, that led to any unauthorized spending.

The Crompton & Knowles deal is a window into the financial struggles of the CDC — as the internal CDC documents show — as well as the debate over "affordable housing" and the group's conflicts with city officials.

At their May 15 board meeting, CDC board members expressed frustration with city officials for holding back grant money and the way they went about seizing chunks of other taxpayer-funded grants to pay off outstanding taxes on the Crompton and Knowles building.

As of last week, that property is $13,596 behind on taxes, according to the city tax collector's office.

"This year, we have no contracts at all for block grant money. We're using up our developer's fees, which isn't a good policy," according to minutes from the meeting. "The city took $12,000 for taxes on 93 Grand, and additional money from our (federal neighborhood stabilization funds). They didn't discuss it with us; they just took it."

Timothy J. McGourthy, the city's chief development officer, said in an interview last week that "the treasurer's office followed a standard process."

He added that the CDC "did not live up to the payment plan."

As a result, the treasurer's office collected the taxes from the grant.

CDC officials noted that while the CDC has historically received taxpayer support in the form of federal and state grants, it has never received money raised from city property taxes.

At the same May meeting, board members complained about their perceived loss of influence on the City Council, with Main South resident and supporter, At-Large Councilor Joseph C. O'Brien, not running for re-election in the fall.

Barbara G. Haller, a former longtime council backer of the CDC and now a CDC board member, was defeated two years ago by new District 4 Councilor Sarai Rivera, whom members said at the May meeting was not a strong supporter and is more of a backer of private development.

"Sarai knows the issues," the group's treasurer, Jack Foley, a Worcester School Committee member and Clark University vice president of community relations, said at the meeting. "We've talked to her about it and she has not taken it on as a major issue for her."

In an interview, Ms. Rivera took issue with that characterization, saying Main South and other CDCs are vital to producing housing in the poor neighborhoods she represents, along with private developers such as Hampton Properties, an active builder in low-income areas.

However, Ms. Rivera maintained that she must be responsive not only to the Main South neighborhood, but also to other constituencies such as Pleasant Street, Green Island and South Worcester, where she noted that the nonprofit South Worcester Neighborhood Center almost folded in the spring.

"I'm a big supporter of CDCs," she said. " A lot of focus has been on Main South. But I'm the District 4 city councilor, not the Main South city councilor.

"I feel we have a good working relationship," she said.

In an interview, Mr. Teasdale said that since the May meeting, he has met with Ms. Rivera and established, he feels, a better rapport. He said it was natural that since Ms. Rivera had supplanted Ms. Haller, it would take time to get a collegial relationship going.

Meanwhile, the group has been shaken by the fallout from the split between Mr. Teasdale and Mr. Breault, who have worked together for more than 20 years despite political differences.

Mr. Breault is a self-described conservative and Mr. Teasdale is known for a liberal brand of politics. Yet they have agreed on most issues relating to the need for affordable housing for the poor in Main South. Mr. Breault says he admires Mr. Teasdale's leadership in creating 240 units of housing in what was once a far more depressed neighborhood.

Until now.

The two nearly came to blows in an obscenity-laden shouting match one morning in late June in the parking lot of the CDC on Main Street, according to both men's accounts.

Mr. Teasdale also said Mr. Breault left an obscenity-filled message on his voice mail, which Mr. Breault did not dispute.

Now the CDC's executive committee has banned Mr. Breault from meetings, removed his public safety group from the CDC offices and called Mr. Breault in to face what Mr. Teasdale says are sanctions for unacceptable behavior, including Mr. Breault's alleged verbal bullying of Mr. Teasdale and others.

For his part, Mr. Breault admits that he "lost it" in the encounter, but maintains that he has never had problems with other board members. So far, he has not responded to a request to meet with the executive board.

Mr. Teasdale accused Mr. Breault of "manipulating the press" after the incident and suggested he leave the board.

"Mr. Breault is loud and aggressive and tries to be physically intimidating," Mr. Teasdale said "You can either be intimidated by that or stand up to that."

Mr. Breault, in turn, asserted that Mr. Teasdale should resign, even though Mr. Breault has recently backed a three-year guaranteed contract with a raise for Mr. Teasdale, who has never had a contract. As of 2011, the most recent year for which the CDC's tax return was available, Mr. Teasdale made a salary of $99,239, with $14,331 in benefits.

Ostensibly, the argument was over Mr. Breault's allegations that Mr. Teasdale wasn't paying sufficient attention to a traffic improvement plan to remedy a dangerous intersection where Mr. Breault's girlfriend's daughter had recently been in a serious accident.

Mr. Breault, though, says he had also become increasingly estranged from Mr. Teasdale over what he alleged was Mr. Teasdale's deliberate minimization of the CDC's responsibility to pay back HUD money. He asserted that Mr. Teasdale had put the amount at anywhere from $14,000 to $40,000; city officials say it is closer to $300,000.

"All I wanted was the truth," Mr. Breault said, adding that he felt that as a board member, he was one of Mr. Teasdale's bosses. "Now I was finally speaking up about it."

Mr. Teasdale denied misrepresenting anything and said the cash value of what could be owed to HUD by the CDC, or the city, is in dispute.

Mr. Breault said he also believed that Mr. Teasdale was keeping the sale of 93 Grand St. quiet to downplay the perception that the local community would lose control over the project and how much of it would be devoted to low-income as opposed to owner-occupied units.

Mr. Breault said he, and many other Main South residents, have come to believe that the neighborhood needs more owner-occupants, not renters. "We have enough," he said.

He said that view was expressed by a majority of neighborhood people who came to a community meeting about the Crompton & Knowles building in September 2012. But the issue had already been decided a few days earlier by the Planning Board, he said. Meanwhile, Mr. Breault complained that a blue-ribbon panel of city leaders from outside the neighborhood is now overseeing the future of the building.

Mr. Teasdale, Mr. Foley, and the CDC's president, Mark Waters, all said the future of 93 Grand St. was never hidden, and the CDC's community organizer went door to door to publicize it.

And in an ideological split, Mr. Breault said he won't support the "Promise Neighborhoods" concept touted by Mr. Teasdale — a federal government-backed "cradle-to-career" community-based social services program for inner cities.

Mr. Waters said he, and the board, are standing behind Mr. Teasdale, though he noted that Mr. Breault has done much good work over the years, particularly around public safety.

Mr. Breault's behavior "is unacceptable," he said.

As for Mr. Teasdale, "you won't find another CDC director in the nation who's been as successful," Mr. Waters said.

Contact Shaun Sutner at ssutner@telegram.com. Follow him on Twitter @ssutner.